Daniel Knowles writes for the Economist about politics and economics and is @dlknowles on Twitter.

Child benefit cuts: when is a benefit actually a tax break?

I've got a column in this morning's newspaper on who is taking the burden of paying down our deficit. To sum up, it's middle-class families who are shouldering the bulk of the cuts and spending reductions. That's because the government is withdrawing or cutting an awful lot of benefits which go to people with children, from child benefit for higher earners to tax credits for lower earners.

Now, there are plenty of people who will say "good riddance" – the Government shouldn't pay benefits to anyone on an average income, yet alone a high one. But actually, it makes perfect sense to pay benefits to families. Almost uniquely in the Western world, Britain chooses to tax individuals, rather than families. As such, a single man earning £45,000 pays the same amount of tax as one who has a wife and several children to raise. As we report today, according to the OECD, the Paris-based think tank, Britain's tax system places a higher burden on families than almost any other country.

In a way, that's a victory for feminism: the taxman doesn't expect women to stay at home. But seeing as at least one parent must stay at home to raise children, or both have to pay for expensive childcare, the result is that families with children end up being much worse off than childless people on equivalent incomes. We make up for this by paying back some of the tax in the form of child benefit, tax credits, free child care and so on. While some of these benefits are individually being increased, overall, they're being cut quite starkly.

In a way, the child benefit cut ought to concern us least; some of the changes to tax credits are to hurt more, and it does affect the wealthiest recipients. But at the same time, the child benefit illustrates exactly how muddled the Government's thinking on this is, not least because for many families, child benefit is the only thing they get to help with the costs of bringing up children.

George Osborne and David Cameron have repeatedly defended a policy which hurts the "top 15 per cent" of income earners. But while a salary of £43,000 does put you into the top 15 per cent of income tax payers, that doesn't mean this policy only affects 15 per cent of families. People in their 30s and 40s – so people with children – tend to have higher incomes. The Treasury couldn't give me an exact estimate, but based on their calculations of how much it will save, the child benefit cut will hit closer to 25 per cent of families. Narrow it down further to families in the South East, where incomes are higher, and it could well be close to 50 per cent.

This is why the policy is causing so much anger; people who are not that wealthy feel like they are being targeted by people who genuinely are extremely wealthy. If you're earning £45,000, George Osborne takes your child benefit. If you're earning £500,000, he lobbies to give you a tax cut. Whatever the merits of each individually, it doesn't "feel" fair (the "cliff-edge" issue – that families with a joint income of £80,000 escape unscathed – is another problem). And given that these people – the aspirational middle classes, in short – are key swing voters, it doesn't seem all that politically well-thought out either.

Influential Conservative thinkers have come to see all welfare spending as something that must be cut. Curiously, however, much welfare "spending" is actually roughly equivalent to tax cutting; it's putting money back into people's pockets. Think of tax credits; the clue is in the name – the whole point is to refund tax to young families. This actually replicates tax breaks that other countries give to families, but because of the way it's administered, we consider it a benefit, and so it adds to "spending".

When you consider that, our bloated state doesn't look so fat after all. Total spending is over 50 per cent of GDP, but departmental spending – the proportion of our national income that the Government deigns to spend on our behalf on services like the NHS, or schools – will fall to about 20 per cent of GDP in this parliament. The rest is all redistribution, mostly to pensioners and families. The question we have to ask ourselves is this: who do we want to redistribute to? And is it really clever to change it so quickly?